One of my concerns would be the way "mistreating" other children is viewed these days. All schools around the world have "no bullying" policies. If kids' feelings get hurt with his whitty responses, they may feel bullied.
As for the way he reacts, I think it's his "normal" personality. Sarcastic, dry sense of humor that we as adults might gravitate towards, but that which a "normal" 5 year old won't even understand let alone "accept", if that makes sense.
So imo, even when there's a little intention behind it, it's not a huge issue for your DS and his personality. However, it could be a mountain if it's read incorrectly by the wrong person.
